[Federal Register Volume 70, Number 83 (Monday, May 2, 2005)]
[Notices]
[Pages 22735-22736]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E5-2079]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-51611; File No. SR-NASD-2005-026]


Self-Regulatory Organizations; National Association of Securities 
Dealers, Inc.; Order Approving Proposed Rule Change Relating to TRACE 
Market Data Fees

April 26, 2005.

I. Introduction

    On February 11, 2005, the National Association of Securities 
Dealers, Inc. (``NASD'') filed with the Securities and Exchange 
Commission (``Commission''), pursuant to Section 19(b)(1) of the 
Securities Exchange Act of 1934 (``Act'')\1\ and Rule 19b-4 
thereunder,\2\ a proposed rule change relating to Transaction Reporting 
and Compliance Engine (``TRACE'') market data fees. The Commission 
published the proposed rule change for comment in the Federal Register 
on March 16, 2005.\3\ The Commission received one comment letter on the 
proposal.\4\ On April 25, 2005, NASD filed a response to the comment 
letter.\5\ This order approves the proposed rule change.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ Securities Exchange Act Release No. 51336 (March 9, 2005), 
70 FR 12921 (March 16, 2005) (``Notice'').
    \4\ See letter from Andrew C. Wels, Chairman, Technology & 
Regulation Market Data Subcommittee, Securities Industry Association 
(``SIA''), to Jonathan G. Katz, Secretary, Commission, received 
April 8, 2005 (undated) (``SIA Letter'').
    \5\ See letter from Sharon K. Zackula, Associate General 
Counsel, NASD, to Katherine A. England, Assistant Director, Division 
of Market Regulation, Commission, dated April 25, 2005 (``NASD 
Letter'').
---------------------------------------------------------------------------

II. Description of the Proposed Rule Change

    The proposed rule change would amend NASD Rule 7010(k) relating to 
TRACE transaction data to: (i) Terminate the Bond Trade Dissemination 
Service (``BTDS'') Internal Usage Authorization Fee and the BTDS 
External Usage Authorization Fee and, in lieu of both fees, establish a 
Vendor Real-Time Data Feed Fee; (ii) define the term ``Tax Exempt 
Organization,'' and amend the defined term ``Non-Professional'' for 
purposes of NASD Rule 7010(k)(3); and (iii) make other minor, technical 
amendments. The proposal is discussed in greater detail in the 
Commission's notice soliciting public comment.\6\
---------------------------------------------------------------------------

    \6\ See Notice, supra note 3.
---------------------------------------------------------------------------

III. Summary of Comments Received and NASD Response

    The Commission received one comment letter on the proposal.\7\ The 
SIA Letter supports NASD's proposed rule change. However, the commenter 
requests that NASD clarify whether ``market data subscribers who are 
natural persons using a brokerage account established in the name of an 
entity name they or their family control'' are considered ``Non-
Professional'' within the meaning of the rule.\8\ In addition, the 
commenter states, with regard to a reduced fee for Tax Exempt 
Organizations, that further review ``may be warranted to determine the 
justifiable basis for a reduced fee, including a better description of 
the tax exempt organizations that would benefit from a reduced price 
structure, a better explanation as to why the reduced fee is necessary, 
and an analysis of the potential impact such a proposal may have on 
competition.''\9\
---------------------------------------------------------------------------

    \7\ SIA Letter, supra note 4.
    \8\ Id. at 3.
    \9\ Id. at 4.
---------------------------------------------------------------------------

    In response to the SIA Letter, NASD states that it ``will consider 
identifying certain non-natural persons as ``Non-Professionals'' as 
part of its continuing review and interpretation of TRACE data fees and 
access.''\10\ In addition, NASD states that ``[t]he proposed definition 
of Tax-Exempt Organization limits significantly the number and type of 
organizations that may apply to receive Real-Time TRACE transaction 
data at the reduced fee and, by definition, limits the use of Real-Time 
TRACE transaction data solely for data access programs for the benefit 
of individual investors and not for commercial purposes.''\11\ Given 
these restrictions, NASD does not believe that the proposal will result 
in any burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act.\12\
---------------------------------------------------------------------------

    \10\ NASD Letter at 2 (``For purposes of TRACE fees, NASD has 
interpreted the term ``Non-Professional'' to further NASD's goal of 
providing access to TRACE market data at no charge to persons who 
seek to use TRACE market data for personal, rather than commercial, 
purposes.'').
    \11\ Id. at 3.
    \12\ See id.
---------------------------------------------------------------------------

    The SIA Letter also stated that the rationale NASD followed in its 
proposal--that financial services industry employees should be 
considered non-professionals when they access data for personal, non-
commercial uses--should be applied uniformly to all other individual 
subscribers of bond or equity market data no matter which self 
regulatory organization, directly or indirectly, controls the market 
data.\13\ The SIA Letter petitions the Commission for rulemaking to 
review the definitions of ``Professional'' and ``Non-Professional'' as 
interpreted for market data fee and administrative purposes by the 
Consolidated Tape Association, the NASDAQ UTP Plan, the New York Stock 
Exchange, NASDAQ, the Options Price Reporting Authority, and NASD.\14\ 
This petition will be considered separately from this proposal.
---------------------------------------------------------------------------

    \13\ SIA Letter at 1.
    \14\ See id.
---------------------------------------------------------------------------

IV. Discussion

    After careful consideration, the Commission finds that the proposed 
rule change is consistent with the requirements of the Act and the 
rules and regulations thereunder that are applicable to a national 
securities association.\15\ In particular, the Commission believes that 
the proposed rule change is consistent with section

[[Page 22736]]

15A(b)(6) of the Act,\16\ which requires, among other things, that the 
rules of an association be designed to prevent fraudulent and 
manipulative acts and practices, to promote just and equitable 
principles of trade, and, in general, to protect investors and the 
public interest, and section 15A(b)(5) of the Act,\17\ which requires, 
among other things, that rules of an association provide for the 
equitable allocation of reasonable dues, fees, and other charges among 
members, issuers, and other persons using any facility or system which 
the association operates or controls. Consolidating the two TRACE data 
fees into one fee and reducing the TRACE data fee for qualifying Tax-
Exempt Organizations appears reasonable and should not adversely affect 
the use and distribution of TRACE data. In addition, the Commission 
believes that clarifying who is a ``Non-Professional'' and therefore is 
not subject to TRACE fees is reasonable and consistent with the goal of 
wide dissemination of TRACE transaction data.
---------------------------------------------------------------------------

    \15\ In approving this proposed rule change, the Commission 
notes that it has considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
    \16\ 15 U.S.C. 78o-3(b)(6).
    \17\ 15 U.S.C. 78o-3(b)(5).
---------------------------------------------------------------------------

V. Conclusion

    It is therefore ordered, pursuant to section 19(b)(2) of the 
Act,\18\ that the proposed rule change (SR-NASD-2005-026) be, and it 
hereby is, approved.
---------------------------------------------------------------------------

    \18\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\19\
---------------------------------------------------------------------------

    \19\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Margaret H. McFarland,
Deputy Secretary.
[FR Doc. E5-2079 Filed 4-29-05; 8:45 am]
BILLING CODE 8010-01-P